Envío Digital
Central American University - UCA  
  Number 234 | Enero 2001



Espinosa Villareal: The Tip of an Iceberg

In mid-November, a typical "big fish" in the ocean of PRI corruption took refuge in Nicaragua, in a shady deal apparently worked out by the Zedillo and Alemán governments. This is a brief summary of his record.

Jorge Alonso

The Mexican media have helped us learn something about the career of Oscar Espinosa Villareal, a high- ranking official in the regime of Mexico’s Institutional Revolutionary Party (PRI) who sought asylum in Nicaragua late last year. The information that has been made available goes back to the 1980s, when Espinosa was named to the Securities Commission, where his duties included covering up his predecessor’s questionable operations. When the stock market collapsed at the end of Miguel de la Madrid’s presidential term, impoverishing many Mexicans who had been dazzled by the high return rates promised by the market and illicitly enriching a handful of privileged allies, Espinosa was implicated in the failure of the MexFin brokerage house. Protected by incoming President Carlos Salinas de Gortari, Espinosa then became director of a very important public financial institution, the Nacional Financiera. In 1991, he arranged for that institution to grant improper loans to relatives of Salinas and his successor Ernesto Zedillo.

A prize for corruption

In 1992, Securities Commission personnel were informed that Espinosa (who continued to act as the commission’s president from the offices of Nacional Financiera) had decreed that they be obliged to make an annual contribution to the PRI’s electoral campaigns. The contribution—one entire salary check—was to be turned back in to one of the directors, thus turning the Securities Commission into a kind of payment counter to finance the party. Some officials objected, insisting that the institution had to remain impartial and that they had personally chosen not to affiliate with any party, but it was all to naught.

Under Espinosa, Nacional Financiera was implicated in the loss of over US$ 2 billion. The Treasury Department’s report to the House of Representatives named a long list of problems to explain the bankruptcy: loans granted to associations not properly constituted, improperly drawn up credit plans, missing dossiers, credit granted without collateral and preferentially assigned to influential people, and excessive administrative costs. Despite all of these irregularities in the institution Espinosa was responsible for, he was not sanctioned in any way and the institution’s debts were passed over to the Bank Fund to Protect Savings (FOBAPROA), where it fell to all Mexican taxpayers to cover them. Shortly thereafter, the biggest financial scandal in Mexican—and, indeed, Latin American—history erupted around FOBAPROA itself.

Espinosa’s skill in collecting resources of all kinds for the PRI earned him a post as the PRI’s finance secretary towards the end of Salinas’ term in office. In this new position, he organized a way to issue credit cards to PRI activists without any guarantees. Many of the debts from these cards also ended up in FOBAPROA. Espinosa’s greatest achievement was to get Cabal Peniche—a Mexican banker now in prison in Australia—and other financiers to make big contributions to PRI campaigns, especially Zedillo’s. This contributed to the failure of several banks, whose debts were passed to FOBAPROA as well. Moreover, these contributions were not declared to the Federal Electoral Institute, as mandated by law.

In payment for his dirty work, Zedillo awarded Espinosa the post of Mexico City regent. Once in the capital’s municipal government, Espinosa contributed through continued irregularities to the bankruptcy of a public transport company, was responsible for the lack of supervision in the construction of metro lines, and saddled the government with an excessive and improperly accrued debt, just to name some of his achievements. To continue protecting him, Zedillo named him Tourism Secretary in the second half of his term.

On February 22, 2000, the Comptroller General’s office in the Federal District—at that time under Democratic Revolutionary Party (PRD) administration—called Espinosa to testify in a case in which he was accused of embezzling over $40 million. Representatives from the PRD and the National Action Party (PAN) questioned him on how he had used half of the income generated from tourism taxes. The Comptroller’s representation within the Tourism Secretariat admitted that there were irregularities, but with President Zedillo’s support, Espinosa left his faithful deputy in charge of Tourism and went into hiding to escape the accusations.

In August 2000, the just-elected mayor of Mexico City, Andrés Manuel López Obrador, insisted that Zedillo’s illegal receipt of money from Cabal Peniche would have to come out. His insistence was based on a Supreme Court resolution directing that the House of Representatives be given information on one of the failed banks whose debts had ended up in FOBAPROA—by then converted into the Institute to Protect Bank Savings (IPAB).

López Obrador asked President-elect Vicente Fox to do his duty unflinchingly and form a Truth Commission to investigate everything related to IPAB, declaring emphatically, "I want to point out that the PRI’s finance secretary at that time was Oscar Espinosa Villarreal. This is proven fact. He was the one who closed the deal between Banco Unión and the PRI."

Will this "untouchable" fall?

Without the protection of the PRI in the presidential office, Espinosa fled the country. He arrived in Nicaragua on November 12, 2000, illegally carrying US$1.5 million in cash. He asked to be granted asylum two weeks later, but was detained shortly thereafter in response to the Mexican government’s pressure on the Nicaraguan government. López Obrador maintained that Espinosa had information essential to an investigation of former President Zedillo, and emphasized the importance of the case in helping put the lie to the maxim that you can’t touch the "untouchables" in Mexico and thus ending the reign of impunity in the country.

Espinosa could provide information on many things, not only the irregularities committed in the Federal District under his administration (1994-1997), but also other issues of utmost importance, like PRI finances. Another line of investigation should be into those people who illegally enriched themselves from Mexico City government coffers. The PRD insists that Espinosa bears a share of responsibility in the illegal financing of PRI campaigns and irregular management of a public financial institution. Both the PRD and PAN benches in the Senate have demanded an investigation into whether Zedillo covered up Espinosa’s corruption and helped him flee the country.

In early January, Mexico asked that Espinosa be extradited from Nicaragua. The Nicaraguan justice system twice refused his request for release, and at the end of January refused to grant him asylum.

Since the judicial branch is one of the areas most in need of clean-up in Mexico, it would be no surprise if Espinosa were freed when he is returned. There is still much to do to eradicate corruption in the country, since the seventy-year PRI regime turned the whole system into a solid wall of complicity, extraordinarily resistant to any effort to tumble it.

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